22 Reading: Defining Positioning and Differentiation

What Makes You Different and Better?

Positioning is a strategic process that marketers use to determine the place or “niche” an offering should occupy in a given market, relative to other customer alternatives. When you position a product or service, you answer these questions:

• Place: What place does the offering occupy in its market?
• Rank: How does the product or service fare against its competitors in the areas evaluated by customers deciding what to buy?
• Attitude: How do we want customers to think about this offering and the benefits it offers them?
• Outcomes: What must we do to ensure the product or service delivers on the positioning we select?

Marketers use the positioning process to identify the distinctive place they want a product or service to hold in the minds of a target market segment. Effective positioning is always aimed at a specific target segment. In fact, positioning tailors the generally focused value proposition to the needs and interests of a particular target segment.

Positioning can be subtle and hard to detect, but it can also be easy to spot when it conforms to your perceptions as a consumer. Perhaps one of the following positions appeals to you: Volvo, for example, positions itself as a family of premium vehicles that are well designed for performance, innovation, and safety. Kia strives to position itself as delivering practical, utilitarian vehicles that offer high quality and value for the price. Cadillac is, well, the Cadillac of automobiles: powerful, luxurious, and catering to every need of its well-heeled drivers and passengers.

Differentiation is closely related to positioning. Differentiation is the process companies use to make a product or service stand out from its competitors in ways that provide unique value to the customer. Differentiation identifies a set of characteristics and benefits that make a product different and better for a target audience. Ideally these qualities are things that 1) customers value when they are evaluating choices in a purchasing decision, and 2) competitors cannot easily copy. When both conditions exist, the offering is more attractive to target customers.

Differentiation is at work any time you’re choosing between two products in the same category. For example, when you’re buying a soft drink, why do you choose Coke, Pepsi, Sprite, or Mountain Dew? Is it because of the taste? The cost? The level of sugar or caffeine? Or is it something less tangible, like the way you just want to smile when you drink Coke, or you feel amped up when you drink Mountain Dew? These tangible and intangible qualities are what differentiate one soft drink from another.

Interconnected Strategies

Positioning and differentiation are connected in important ways. Effective positioning for a product or service is based on the differentiating characteristics or qualities that make the product/service better than the competition in the minds of the target segment. Positioning and differentiation are strategic activities: marketers work to create a desired position for a product or service in the market, rather than waiting for it to be created by customers, the public, or competitors. The end result of positioning is the successful creation of a market-focused value proposition: “This is the compelling reason why the target segment should buy the product.” Positioning shapes key elements of the marketing mix: which features matter most in the differentiation of a product or service, what messages to communicate about the offering, how to price it relative to competitors, and the role distribution might play in satisfying the customer.

To illustrate, think about American retail chains targeting American households as a target segment. The table below identifies the ways in which three large retail chains position themselves to attract customers and the key differentiators they use to set themselves apart.

Note that, in each case, positioning is based on factors that are important to the target segment(s) each retailer focuses on. Wal-Mart customers are very brand-loyal because of the company’s commitment to low prices and huge selection. Loyal Target customers love browsing the latest, on-trend apparel, accessories, and home fashions. Macy’s shoppers appreciate a more elegant, upscale shopping experience and are willing to pay more for upscale brands. Each of these positioning strategies carves out a “niche” of the retail market that defines the particular, differentiating strengths of each chain in the minds of customers.

Positioning is essential for launching a new product or service, because it helps marketers and customers understand how the new offering fits into the set of available choices, and it makes a set of claims about why customers should consider it. Positioning can also be useful at any other stage of the product life cycle to help clarify what makes a product or service different from competitors and why people should prefer it.

Positioning Is a Statement

Positioning plays an important role for marketers in expressing how they will make an offering attractive to customers. It also helps customers become educated about the options available to them so they can evaluate and select the product or service that’s the best fit.

Positioning is most often articulated as a positioning statement. A positioning statement is one sentence that concisely identifies the target market and what you want customers to think about your brand. This statement should include 1) the target market, 2) the brand name, 3) the key points of differentiation, 4) the product/service category or frame of reference in which you are establishing this market position, and 5) the reasons customers should believe the positioning claims.

Positioning statements should also be statements of truth. Effective positioning is credible and convincing, reflecting customers’ actual experiences with the product or service. If a positioning statement does not reflect the customer’s reality, the positioning will fail because it will not take hold in the minds of consumers. Likewise, positioning must be based on qualities that matter to customers as they consider which product/service to purchase. If positioning is based on characteristics or customer benefits that do not matter, customers will opt for other offerings that deliver what they care about. We will discuss positioning statements in more detail later in this module.

Same Offering, Different Positioning

Because effective positioning is always linked to a specific target segment, it is worth pointing out that the same basic product or service may be positioned differently for different market segments. When this happens, it is because companies recognize that their target segments are looking for different qualities when they make their purchasing decisions. Different positioning strategies for the same product enable marketers to communicate the value of the product or service more effectively to each target audience.

For example, the airline JetBlue caters to two “sweet spot” target segments: 2) “high-value leisure travelers” and 2) “mixed-wallet customers,” who fly for both business and leisure. The airline’s positioning for “high-value leisure travelers” focuses on attractively priced airfare and packages to fun vacation destinations, along with a comfortable flying experience. For “mixed-wallet customers,” JetBlue positions itself as providing a competitively priced and convenient flying experience with features like expedited security and multiple fare options in case travel plans need to change. In both cases, JetBlue is selling air travel, but the positioning for each target segment is built around the differentiating qualities that make JetBlue particularly attractive to those segments.^[1]

Check Your Understanding

Answer the question(s) below to see how well you understand the topics covered in this outcome. This short quiz does not count toward your grade in the class, and you can retake it an unlimited number of times.

Use this quiz to check your understanding and decide whether to (1) study the previous section further or (2) move on to the next section.